YEN STRENGTHENS AS KURODA GIVES FIRST FORWARD GUIDANCE

The Japanese Yen soared after a statement from the Bank of Japan governor, Hurohiko Kuroda. In his statement to parliament, he said that the BoJ would start talking about unwinding its massive stimulus package in April 2019. This was the first time the governor gave a forward guidance about the monetary policy. As he made the statement, the yen rallied against the dollar, reaching an intraday high of 105.7.

In the United Kingdom, Theresa May delivered a speech amidst division in her party. Some members of her conservative party have argued that they would be open to a Jeremy Corbyn government which presents a new challenge to May. In his recent statements, Corbyn has sounded more supportive of the European Union, which many young people seem to support. In her speech, May introduced the five tests which any exit deal will have to pass.

Yesterday, Donald Trump rattled the market by suggesting that the country will introduce new tariffs on steel and aluminum. After a meeting with the CEOs of the industry, he commented that the country would slap a 25% tariff on steel and a 10% on aluminum. Such policies are what propelled Trump to the presidency. The threat of retaliation and a trade war led to the markets falling around the world. The US dollar, which was previously going up reversed.

Over the weekend, traders will be paying a closer attention to the EU where two important things will happen. First, in Germany, the SDP will go to a vote to decide whether they will be open to forming a coalition government with Merkel. No one knows how this vote will go because it is impossible to have a poll on the members. Second, traders will focus on the election in Italy. Will the right-wing party win?

USD/JPY

The USD/JPY pair fell after Bank of Japan governor announced plans to start ending the normalization in 2019. This provided a short-term boost to the yen, coming at a period when traders are concerned about a looming trade war. There is a likelihood that the pair could see some reversal at this stage and possibly move to the 200-day moving average level of 105.87.

GBP/USD

The cable was little moved following Theresa May’s speech. It had an intraday high of 1.3815 and a low of 1.3709. There is a likelihood that the pair could recover as Trump moves to introduce new trade tariffs. Traders should watch out for the 200-day moving average level of 1.3853.

EUR/USD

The pair was higher by more than 0.30% following Trump’s statement about the tariffs on steel and as traders waited for the Italian election and the German coalition talks. The pair could continue moving higher to the 1.2360 level, which is the 23.6% Fibonacci Retracement level.